New Home Sales Plummet

More news that points to the slowing housing market: new home sales hit their lowest levels in 13 years, according to an article on CNN Money. This is yet another indication of a housing glut, and a continuing correction in the housing market. The drop in sales was much more than predicted by analysts.

Unfortunately for sellers, where there is a surplus, there is also a drop in price. This will not help support consumer confidence -- especially after a week like this, where we saw the biggest one day decline on the stock market since 9-11. While markets are showing some resilience, no one is quite sure that the fallout from the Chinese market sell-off is over yet.

The drop in new home sales hit every region of the US; there was an 8.1 percent drop in the Midwest, and a 37.4 percent dive in the West. The South, which normally accounts for more than half of the nation's new home sales (probably thanks to snowbirds), saw January's pace off nearly 10 percent from the month before.

Is this a housing meltdown? I'm still looking for signs that I feel I can rely on, rather than following the analyst who seem to blow with the wind, or are biased because of their connection to the housing industry. Bias is tricky: do they want a housing bubble to burts or do they want the house prices to stay artificially high? This is the murk that I'm trying to see through.

Frankly, I want to sell my current property and buy, but doing that in the midst of a housing price crash could leave us in a pickle.

I do think that the health of lenders is a good indicator of how the market is doing. If subprime lenders (those who give loans to people with lower credit scores) start to topple at a rapid rate, then the chance of a housing meltdown is higher. Lenders topple because of foreclosures; higher foreclosures mean more properties on the market; a flood of properties means prices drop like rocks.

My personal favourite lender health site is the Implode-O-Meter. In just the last couple of weeks, another 4 lenders have bit the dust. Since December, 27 lenders in total have either gone out of business or have ceased to operate independently.

Personally, I've checked the financial health of my lender, and I'll stay put with them. If you are wondering about your lender, check out A.M. Best. They provide financial ratings of lenders. If your lender seems shaky, you might want to consider moving your mortgage if the costs are not too prohibitive.

You can read on our site how to evaluate the pros and cons of moving a mortgage. Normally, you'd only do it to refinance or when the mortgage is due, but if you are with a subprime lender and might just qualify for a prime loan, it could be a good time to move now.

Michael Chantrel
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